Fourth Quarter 2020 Earnings Presentation...Leverage ratio and TTM Adjusted EBITDA reconciliations...
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1 Fourth Quarter 2020 Earnings Presentation November 19, 2020
Transcript of Fourth Quarter 2020 Earnings Presentation...Leverage ratio and TTM Adjusted EBITDA reconciliations...
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Fourth Quarter 2020 Earnings Presentation November 19, 2020
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Cautionary Statements
This presentation contains forward-looking statements that are subject to known and unknown risks and uncertainties, many of which are beyond our control. All statements other than statements of historical fact included in this presentation are forward-looking statements. Forward-looking statements appearing throughout this presentation include, without limitation, statements regarding our intentions, beliefs, assumptions or current expectations concerning, among other things, financial position; results of operations; cash flows; prospects; growth strategies or expectations; customer retention; the outcome (by judgment or settlement) and costs of legal, administrative or regulatory proceedings, investigations or inspections, including, without limitation, collective, representative or any other litigation; and the impact of prevailing economic conditions. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “believes,” “expects,” “may,” “will,” “shall,” “should,” “would,” “could,” “seeks,” “aims,” “projects,” “is optimistic,” “intends,” “plans,” “estimates,” “anticipates” and other comparable terms. We caution you that forward-looking statements are not guarantees of future performance or outcomes and that actual performance and outcomes, including, without limitation, our actual results of operations, financial condition and liquidity, and the development of the market in which we operate, may differ materially from those made in or suggested by the forward-looking statements contained in this presentation. In addition, even if our results of operations, financial condition and cash flows, and the development of the market in which we operate, are consistent with the forward-looking statements contained in this presentation, those results or developments may not be indicative of results or developments in subsequent periods. A number of important factors, including, without limitation, the risks and uncertainties discussed under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K and the Quarterly Report on Form 10-Q filed with the U.S. Securities and Exchange Commission, could cause actual results and outcomes to differ materially from those reflected in the forward-looking statements. Because of these risks, we caution that you should not place undue reliance on any of our forward-looking statements. New risks and uncertainties arise from time to time, and it is impossible for us to predict those events or how they may affect us. Further, any forward-looking statement speaks only as of the date on which it is made. We undertake no obligation to revise the forward-looking statements in this presentation after the date of this presentation.
Market data and industry information used throughout this presentation are based on management’s knowledge of the industry and the good faith estimates of management. We also relied, to the extent available, upon management’s review of independent industry surveys, forecasts and publications and other publicly available information prepared by a number of third party sources. All of the market data and industry information used in this presentation involves a number of assumptions and limitations which we believe to be reasonable, and you are cautioned not to give undue weight to such estimates. Although we believe that these sources are reliable, we cannot guarantee the accuracy or completeness of this information, and we have not independently verified this information. While we believe the estimated market position, market opportunity and market size information included in this presentation are generally reliable, such information, which is derived in part from management’s estimates and beliefs, is inherently uncertain and imprecise. Projections, assumptions and estimates of our future performance and the future performance of the industry in which we operate are subject to a high degree of uncertainty and risk due to a variety of factors, including those described above. These and other factors could cause results to differ materially from those expressed in our estimates and beliefs and in the estimates prepared by independent parties.
We present Adjusted EBITDA, Adjusted EBITDA margin (Adjusted EBITDA over Net Sales), Net debt (total debt less cash and cash equivalents), Adjusted Net Income Per Share, and Leverage ratio (net debt or total debt less cash and cash equivalents, over Adjusted EBITDA on trailing twelve month (“TTM”) basis) to help us describe our operating and financial performance. Adjusted EBITDA, Adjusted EBITDA margin, Net debt (total debt less cash and cash equivalents), Adjusted Net Income Per Share, and Leverage ratio are non-GAAP financial measures commonly used in our industry and have certain limitations and should not be construed as alternatives to net income, net sales and other income data measures (as determined in accordance with generally accepted accounting principles in the United States, or GAAP), or as better indicators of operating performance. Adjusted EBITDA, Adjusted EBITDA margin, Net debt, Adjusted Net Income Per Share, and Leverage ratio, as defined by us may not be comparable to similar non-GAAP measures presented by other issuers. Our presentation of such measures should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. See the appendix to this presentation for a reconciliation of Adjusted EBITDA to net income, Adjusted EBITDA Margin, Adjusted Net Income Per Share to Net Income Per Share, net debt to total debt, and Leverage Ratio.
Fiscal Periods - The Company has a fiscal year that ends on September 30th. It is the Company's practice to establish quarterly closings using a 4-5-4 calendar. The Company's fiscal quarters end on the last Friday in December, March and June.
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Record Quarterly Earnings in Q4 2020
Q4 Review
Delivered record quarterly net income, adjusted EBITDA and adjusted EPS
Achieved 20.6% adjusted EBITDA margins on a consolidated Atkore basis
Repaid $40M of debt in the quarter and ended the period with a net leverage ratio2 of 1.6x
1. See non-GAAP reconciliation in appendix.2. Leverage ratio and TTM Adjusted EBITDA reconciliations can be found either in the appendix, or in Exhibit 99.1 to form 8-K filed on November 19, 2020.
501.7 477.4
Q4 2019 Q4 2020
-5%
46.0
54.2
Q4 2019 Q4 2020
+18%
88.898.2
Q4 2019 Q4 2020
+11%
1.01
1.18
Q4 2020Q4 2019
+17%
123.4
284.5
Q4 2020Q4 2019
+130%
Revenue, $M Net Income, $M Adjusted EBITDA1, $M Adjusted EPS1, $/share Cash Balance, $M
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Strong operating performance and excellent teamwork despite challenging conditions
FY2020 Results & Recent Business Updates
1. See non-GAAP reconciliation in appendix.
FY2020 Results
Excellent safety performance in FY20; reduced
global incident rate by more than 20%
Net sales declined 7.9% in FY20 down to $1.8B
primarily due to market volume changes
Delivered record Net Income of $152.3M and
Adjusted EBITDA1 of $326.6M; both up vs. FY19
Business Update Post Sept 30th
Acquired the assets of Queen City Plastics, Inc.,
to help grow our plastic conduit portfolio
Repurchased $15M of stock in October 2020
Launched new MC Glide™ Aluminum Clad Cable;
a completely redesigned cable that makes pulling
cable easier and faster on a job site
Expect FY2021 Net Sales, Adjusted EBITDA and Adjusted EPS
to all be higher than FY 2020
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Q4 Income Statement Summary
1. See non-GAAP reconciliation in appendix2. Adjusted EBITDA Margin is Adjusted EBITDA as a percentage of Net sales
($’s in millions)
Q4 2020 Q4 2019Y/Y
Change
Y/Y %
Change
Net Sales $477.4 $501.7 ($24.3) (4.8%)
Operating Income $84.2 $66.2 $18.0 27.2%
Net Income $54.2 $46.0 $8.2 17.9%
Adjusted EBITDA1 $98.2 $88.8 $9.4 10.6%
Adjusted EBITDA Margin2 20.6% 17.7% +290 bps -
Net Income per Share (Diluted) $1.11 $0.94 $0.17 18.1%
Adjusted Net Income per Share1 (Diluted) $1.18 $1.01 $0.17 16.8%
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Consolidated Atkore Q4 2020 Bridges
Excellent commercial and operational execution
across the entire business
Multiple benefits helped drive and enable strong
profit growth in the quarter, some that are not
expected to recur on an on-going basis in FY2021
$48
$20 $3
2019 Volume/Mix Price M&A FX/Other 2020
$502M
$477M$0
$12
$13 $0$4
$4
2019 Volume/Mix Price
vs. Cost
M&A Productivity/
Investment/
Inflation
FX/Other 2020
$89M
$98M
Volume/Mix (9.5%)
Price +4.0%
Acquisitions/Divestitures +0.1%
FX/Other +0.6%
Total (4.8%)
Q4 Net Sales Bridge Net Sales % Change
Q4 Adjusted EBITDA Bridge Highlights
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Electrical Raceway Mechanical Products & Solutions
Q4 2020 Segment Results
$35
$24 $2
Price2019
$0
Volume/Mix M&A FX/Other 2020
$373M $364M
Q4 Net Sales Bridge
($’s in millions)
Q4
2020
Q4
2019Y/Y
Change
Net Sales $364.1 $373.3 (2.5%)
Adjusted EBITDA $92.9 $80.0 16.1%
Adjusted EBITDA Margin 25.5% 21.4% +410 bps
$12 $4
$1
2019 PriceVolume/Mix
$0
M&A FX/Other 2020
$114M
$129M
Q4 Net Sales Bridge
($’s in millions)
Q4
2020
Q4
2019Y/Y
Change
Net Sales $113.9 $128.7 (11.5%)
Adjusted EBITDA $16.1 $21.1 (23.8%)
Adjusted EBITDA Margin 14.1% 16.4% (230 bps)
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Cash, Leverage Ratio & Other Key Metrics
1. See non-GAAP reconciliation in appendix.2. Leverage ratio and TTM Adjusted EBITDA reconciliations for all periods above can be found either in the appendix, or in Exhibit 99.1 to form 8-K filed on November 19, 2020, August 4,
2020, May 5, 2020, February 4, 2020, November 22, 2019, August 8, 2019, May 7, 2019, or February 6, 2019.
2.9 2.8 2.62.2 2.1 2.1 1.9
1.6
Q3 2019Q1 2019 Q2 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020
Reduced by 0.6x
75.951.5
100.7123.4
164.1137.2
237.3284.5
Q4 2019 Q2 2020Q1 2019 Q2 2019 Q3 2019 Q1 2020 Q3 2020 Q4 2020
+$161M vs. Prior Year
Cash & Cash Equivalents, $M
Leverage Ratio2: Net Debt to TTM Adj. EBITDA ($’s in millions)
As of 9/30/2020
Cash and cash equivalents $284.5
Total Debt $803.7
Net Debt $519.3
TTM Adjusted EBITDA2 $326.6
Leverage Ratio1
Total debt / TTM Adjusted EBITDA2 2.5
Net debt / TTM Adjusted EBITDA2 1.6
($’s in millions) FY20
Net cash from operating activities $248.8
Capital expenditures $33.8
Free cash flow1 $215.0
Debt Repayment $40.0
Stock repurchases $15.0
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Outstanding Track Record of Growth
1. See non-GAAP reconciliation in appendix
Adjusted EBITDA1, $M Return on Capital1
(ROC), %
164
235 228
272
324 327
FY2016FY2015 FY2017 FY2018 FY2019 FY2020
+15% CAGR
114
140
97107
175
215
FY2016FY2015 FY2017 FY2019FY2018 FY2020
+13% CAGR
2.7
10.7
12.2
15.4
17.017.8
FY2018FY2015 FY2016 FY2019FY2017 FY2020
+1,510 bps
Free Cash Flow1, $M
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Estimating Fiscal Year 2021 Net Sales, Adjusted EBITDA and Adjusted EPS to be up versus
FY2020 led by strong operational performance and profit growth in Q1 2021
Expecting to Continue to Grow in FY2021
Outlook Summary
1. Reconciliation of the forward-looking full-year 2020 outlook for Adjusted EBITDA and Adjusted EPS is not being provided as the Company does not currently have sufficient data to accurately estimate the variables and individual adjustments for such reconciliation.
2. Represents weighted-average shares outstanding in millions used in calculation of Adjusted EPS outlook.
Outlook Items for
Consolidated Atkore
Q1 2021
Outlook
FY2021
Outlook
Net Sales +1% – +3% +2% – +6%
Adjusted EBITDA1 $95 – $105M $340 – $360M
Adjusted EPS1 $1.15 – $1.30 $3.95 – $4.25
Interest Expense $35 – $40M
Tax Rate 25% – 27%
Capital Expenditures $50 – $55M
Stock Buybacks $15 – $35M
Diluted Shares Outstanding2 ~48M
Appendix
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FY20 Income Statement Summary
1. See non-GAAP reconciliation in appendix2. Adjusted EBITDA Margin is Adjusted EBITDA as a percentage of Net sales
($’s in millions)
FY 2020 FY 2019Y/Y
Change
Y/Y %
Change
Net Sales $1,765.4 $1,916.5 ($151.1) (7.9%)
Operating Income $239.6 $223.7 $15.9 7.1%
Net Income $152.3 $139.1 $13.3 9.5%
Adjusted EBITDA1 $326.6 $324.4 $2.2 0.7%
Adjusted EBITDA Margin2 18.5% 16.9% +160 bps -
Net Income per Share (Diluted) $3.10 $2.83 $0.27 9.5%
Adjusted Net Income per Share1 (Diluted) $3.78 $3.62 $0.16 4.4%
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Consolidated Atkore FY 2020 Bridges
$140$38
$29
$3
2019 Volume/Mix FX/OtherPrice M&A 2020
$1,917M
$1,765M
$44
$21 $1
$19 $5
FX/OtherVolume/Mix2019 Price
vs. Cost
M&A Productivity/
Investment/
Inflation
2020
$326M$324M
Volume/Mix (7.3%)
Price (2.0%)
Acquisitions/Divestitures +1.5%
FX/Other (0.1%)
Total (7.9%)
Full Year Net Sales Bridge Net Sales % Change
Full Year Adjusted EBITDA Bridge
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FY20 Sales Breakdown by Market
Source: Atkore analysis and estimates.
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11
16
14
20
33 New
Repair & Remodel
U.S. Residential
Construction
International
OEM
Other
U.S. Non-
Residential
Construction
% of Atkore FY20
Net Sales
By End Market Category Description
▪ Includes Commercial & Industrial, Institutional
and Infrastructure categories
▪ Largest sub-categories include Offices & Data
Centers, Warehouses & Distribution Centers,
Education, Infrastructure, Retail, Hotels and
Manufacturing
▪ Products primarily sold through electrical distribution channel
▪ Long-term positive market trends in Data Centers,
Warehouses, and Healthcare
▪ Weaker market trends in Retail and Hotels
▪ Primarily concentrated in the Commercial &
Industrial and Institutional categories
▪ Largest sub-categories include Education,
Offices, and Healthcare
▪ Products sold through the electrical distribution channel as
well as large retailers
▪ Long-term positive outlook associated with renovation for K-
12 schools in certain regions of the U.S.
▪ Includes Single Family as well as Multi-Unit new
home construction
▪ Products primarily sold through electrical distribution channel
▪ Positive market trends for new home construction
▪ Includes variety of manufacturers that use steel
and metal tubing products
▪ Products are primarily sold directly to the OEM
▪ Solid demand from the renewable energy end-markets as
well as recreational equipment
▪ Primarily electrical and infrastructure sales to
support non-residential construction markets
▪ Sales channel differs by category and country
▪ Market trends vary by geography
Market Review
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Segment Information
Three months ended
September 30, 2020 September 30, 2019
(in thousands) Net salesAdjusted EBITDA
Adjusted EBITDA Margin Net sales
Adjusted EBITDA
Adjusted EBITDA Margin
Electrical Raceway $ 364,148 $ 92,855 25.5 % $ 373,344 $ 80,000 21.4 %
Mechanical Products & Solutions 113,904 16,111 14.1 % 128,661 21,137 16.4 %
Eliminations (632) (295)
Consolidated operations $ 477,420 $ 501,710
Fiscal Year Ended
September 30, 2020 September 30, 2019
(in thousands) Net salesAdjusted EBITDA
Adjusted EBITDA Margin Net sales
Adjusted EBITDA
Adjusted EBITDA Margin
Electrical Raceway $ 1,331,275 $ 299,485 22.5 % $ 1,443,493 $ 292,585 20.3 %
Mechanical Products & Solutions 436,700 61,152 14.0 % 474,260 70,040 14.8 %
Eliminations (2,554) (1,215)
Consolidated operations $ 1,765,421 $ 1,916,538
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Adjusted Earnings Per Share Reconciliation
Consolidated Atkore International Group Inc.
Three months ended Fiscal Year Ended
(in thousands, except per share data)September 30,
2020September 30,
2019September
30, 2020September
30, 2019
Net income $ 54,241 $ 45,997 $ 152,302 $ 139,051
Stock-based compensation 3,762 2,862 13,064 11,798
Intangible asset amortization 8,052 8,598 32,262 32,876
Gain on purchase of business — (7,384) — (7,384)
Loss on extinguishment of debt 273 — 273 —
Other (a) (9,029) (712) (6,712) 7,501
Pre-tax adjustments to net income 3,058 3,364 38,887 44,791
Tax effect (765) (824) (9,722) (10,974)
Adjusted net income $56,534 $48,537 $181,467 $172,868
Weighted-Average Diluted Common Shares Outstanding 47,925 47,845 48,044 47,777
Net income per diluted share $ 1.11 $ 0.94 $ 3.10 $ 2.83
Adjusted net income per diluted share $ 1.18 $ 1.01 $ 3.78 $ 3.62
(a) Represents other items, such as inventory reserves and adjustments, loss on disposal of property, plant and equipment, insurance recovery related to damages of property,
plant and equipment , release of indemnified uncertain tax positions and realized or unrealized gain (loss) on foreign currency impacts of intercompany loans and related
forward currency derivatives.
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Net Income to Adjusted EBITDA Reconciliation
Consolidated Atkore International Group Inc.
Three months ended Fiscal Year Ended
(in thousands)September 30,
2020September 30,
2019September 30,
2020September 30,
2019
Net income $ 54,241 $ 45,997 $ 152,302 $ 139,051
Income tax expense 20,584 16,105 49,696 45,618
Depreciation and amortization 18,946 18,286 74,470 72,347
Interest expense, net 9,457 12,196 40,062 50,473
Restructuring charges (55) 623 3,284 3,804
Stock-based compensation 3,762 2,862 13,064 11,798
Loss on extinguishment of debt 273 — 273 —
Gain on purchase of a business — (7,384) — (7,384)
Transaction costs 17 837 196 1,200
Other (a) (9,029) (712) (6,712) 7,501
Adjusted EBITDA $ 98,196 $ 88,810 $ 326,635 $ 324,408
(a) Represents other items, such as inventory reserves and adjustments, loss on disposal of property, plant and equipment, insurance recovery related to damages of property, plant and
equipment , release of indemnified uncertain tax positions and realized or unrealized gain (loss) on foreign currency impacts of intercompany loans and related forward currency
derivatives.
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Trailing Twelve Month Adjusted EBITDA
Consolidated Atkore International Group Inc.
TTM Three months ended
(in thousands)September
30, 2020September
30, 2020June 26,
2020March 27,
2020December 27, 2019
Net income $ 152,302 $ 54,241 $ 24,078 $ 39,193 $ 34,790
Interest expense, net 40,062 9,457 9,421 10,564 10,620
Income tax expense 49,696 20,584 8,672 13,100 7,340
Depreciation and amortization 74,470 18,946 18,316 18,478 18,730
Restructuring charges 3,284 (55) 474 2,645 220
Stock-based compensation 13,064 3,762 1,656 4,523 3,123
Loss on extinguishment of debt 273 273 — —
Transaction costs 196 17 122 6 51
Other(a) (6,712) (9,029) 984 (1,503) 2,836
Adjusted EBITDA $ 326,635 $ 98,196 $ 63,723 $ 87,006 $ 77,710
(a) Represents other items, such as inventory reserves and adjustments, loss on disposal of property, plant and equipment, insurance recovery related to damages of property, plant and equipment , release of indemnified uncertain tax positions and realized or unrealized gain (loss) on foreign currency impacts of intercompany loans and related forward currency derivatives.
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Net Debt to Total Debt and Leverage Ratio
Consolidated Atkore International Group Inc.
($ in thousands)September 30,
2020 June 26, 2020March 27,
2020December 27,
2019September 28,
2019 June 28, 2019March 29,
2019December 28,
2018
Short-term debt and current maturities of long-term debt $ — $ — $ — $ — $ — $ — $ — $ 26,561
Long-term debt 803,736 846,145 845,694 845,243 845,317 884,503 884,095 878,094
Total debt 803,736 846,145 845,694 845,243 845,317 884,503 884,095 904,655
Less cash and cash equivalents 284,471 237,309 137,202 $ 164,135 123,415 100,734 51,498 75,919
Net debt $ 519,265 $ 608,836 $ 708,492 $ 681,108 $ 721,902 $ 783,769 $ 832,597 $ 828,736
TTM Adjusted EBITDA (a) $ 326,635 $ 317,249 $ 342,007 $ 332,095 $ 324,408 $ 306,656 $ 294,839 $ 283,086
Total debt/TTM Adjusted EBITDA 2.5 x 2.7 x 2.5 x 2.5 x 2.6 x 2.9 x 3.0 x 3.2 x
Net debt/TTM Adjusted EBITDA 1.6 x 1.9 x 2.1 x 2.1 x 2.2 x 2.6 x 2.8 x 2.9 x
Leverage ratio and TTM Adjusted EBITDA reconciliations for all periods above can be found either in the appendix, or in Exhibit 99.1 to form 8-K filed on November 19, 2020, August 4, 2020, May 5, 2020, February 4, 2020, November 22, 2019,
August 8, 2019, May 7, 2019, or February 6, 2019.
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Free Cash Flow Reconciliation
Consolidated Atkore International Group Inc.
Fiscal Year Ended
(in thousands)September
30, 2020September
30, 2019September
30, 2018September
30, 2017September
30, 2016September
30, 2015
Net cash provided by operating activities $ 248,762 $ 209,694 $ 145,703 $ 121,654 $ 156,646 $ 141,073
Capital expenditures (33,770) (34,860) (38,501) (25,122) (16,830) (26,849)
Free Cash Flow $ 214,992 $ 174,834 $ 107,202 $ 96,532 $ 139,816 $ 114,224
Inputs for all periods above can be found either in the appendix, or in our Annual Reports filed on November 19, 2020, November 22, 2019, November 28, 2018, November 29, 2017 and November 29, 2016.
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Return on Capital Calculation
Consolidated Atkore International Group Inc.
Fiscal Year Ended
(in thousands)September 30,
2020
September 30,
2019
September 30,
2018
September 30,
2017
September 30,
2016
September 30,
2015
Income (Loss) Before Taxes $ 201,998 $ 184,669 $ 166,352 $ 126,125 $ 86,781 $ (7,871)
Income Tax Expense (Benefit) 49,696 45,618 29,707 41,486 27,985 (2,916)
Tax Rate % [Income Tax Expense (Benefit) ÷ Income (Loss) Before Taxes] 24.6% 24.7% 17.9% 32.9% 32.2% 37.0%
Operating Income $ 239,556 $ 223,664 $ 179,698 $ 155,953 $ 125,466 $ 36,938
Estimated Taxes on Operating Income [Tax Rate % x Operating Income] 58,936 55,251 32,090 51,297 40,460 13,685
Net Operating Profit After Taxes [Operating Income – Estimated Taxes on Operating Income] $ 180,620 $ 168,413 $ 147,608 $ 104,656 $ 85,006 $ 23,253
Total Assets $ 1,558,525 $ 1,436,995 $ 1,324,060 $ 1,215,092 $ 1,164,568 $ 1,113,799
Cash 284,471 123,415 126,662 45,718 200,279 80,598
Current Liabilities 276,170 287,534 272,747 211,837 204,822 210,498
Short-Term Debt & Current Maturities of Long-Term Debt — — 26,561 4,215 1,267 2,864
Capital Base [Total Assets – Cash – Current Liabilities + Short-Term Debt & Current Maturities of Long-Term
Debt]$ 997,884 $ 1,026,046 $ 951,212 $ 961,752 $ 760,734 $ 825,567
Average Capital Base [Average of Prior Period Capital Base and Current Period Capital Base] $ 1,011,965 $ 988,629 $ 956,482 $ 861,243 $ 793,151 $ 873,363
Return on Capital Percentage [Net Operating Profit After Taxes ÷ Average Capital Base] 17.8% 17.0% 15.4% 12.2% 10.7% 2.7%
Inputs for all periods above can be found either in the appendix, or in our Annual Reports filed on November 19, 2020, November 22, 2019, November 28, 2018, November 29, 2017 and
November 29, 2016.
